Yelp Speaks Out Against Noncompete Clauses

By: James Flippin · April 19, 2023 · Reading Time: 3 minutes

What’s a Noncompete?

The popular online review site Yelp (YELP) recently released a statement supporting the Federal Trade Commission’s proposal to ban noncompete agreements. Noncompete clauses prevent employees from working with a competitor for at least a year after leaving a company.

These contracts are intended to protect businesses from employees stealing company secrets and selling them to a competing company. In other words, an engineer at a popular social media company can’t waltz over to a new company, proprietary algorithm in tow.

However, Yelp argues these contacts are actually bad for business, since they stifle competition.

Yelp’s Review

Yelp has firsthand experience getting stung by a noncompete agreement.

The company says it tried to hire a former Groupon (GRPN) executive, Sung Shin. Yelp wanted to bring Shin on as a product management VP. However, Groupon filed a lawsuit to prevent him from taking the role.

This situation denied Yelp a top candidate for its open role and kept Shin from taking advantage of a major job opportunity. This is just one example of how these clauses can diminish competition for workers. In its comments to the FTC, Yelp highlighted how noncompetes are banned in California, a state well-known for encouraging industry competition and innovation.

Good or Bad?

On the flipside, supporters of noncompete agreements argue that these clauses are actually good for business. They say that noncompete clauses protect trade secrets and help keep turnover low.

Looking forward, the FTC will review comments from all businesses and make a final decision. It is expected to be announced before the end of the year. That said, the ruling could be slowed by red tape. The Chamber of Commerce is reportedly already planning to file a lawsuit against any bans.

Regardless of whether you are CEO or the newest hourly employee at a company, this ruling will impact workers’ ability to seize opportunities for years to come.

Looking for more stories like this? Check out On the Money — SoFi’s one-stop-shop for news, trends, and tips!

Check it out

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Advisor
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.

TLS 1.2 Encrypted
Equal Housing Lender